RAKBank reports flat second quarter net profit as impairments climb
Going forward, the lender's executive management will focus on cost optimisation and improving efficiency
The National Bank of Ras Al Khaimah on Wednesday reported a slight drop in its second-quarter net profit as non-interest income dropped and operating expenses climbed amid challenging market conditions.
Net profit slipped to Dh226.6 million in the three months ending June 30 from Dh226.7m reported in the corresponding period of the 2017, the lender said in a statement to the Abu Dhabi Securities Exchange, where its shares are traded. Total income declined 2.7 per cent year-on-year to Dh940m in the second quarter.
The flat quarterly net profit still beat Egyptian investment bank EFG-Hermes' forecast, which estimated that RAKBank would make a profit of Dh220m for the period.
The bank's financial performance reflects the ongoing shift of "business strategy to a more diversified balance sheet," Peter England, chief executive of RakBank said. "Funding cost has increased more than expected as a result of increased competition for deposits in the market.”
Going forward, the lender's executive management and board of directors will focus on rationalising operations and focusing on "cost optimisation to improve overall efficiency, which will show significant results in 2019," the bank said in a separate regulatory filing.
Banks in the UAE and broader Arabian Gulf markets are expected to improve profitability amid a pick-up in economic activity on the back of a recovery in oil prices.
EFG-Hermes forecast aggregate second-quarter earnings growth of 7 per cent year-on-year for Middle East and North Africa banks in a report released earlier this month. It predicted an 8 per cent year-on-year rise in profit for UAE lenders in the second quarter.
Impairments charges to cover bad loans grew 13.4 per cent year-on-year to Dh324.6m in the second quarter, RAKbank said.
The lender said non-interest income dropped 13.4 per cent to Dh254.2m during the second quarter, while operating expenses grew 6.7 per cent to Dh389.4m mainly on the back of an increase in employment costs during the period.
The bank, which received stable outlook from credit rating agency Fitch earlier this month, said its net fee and commission income came in at Dh686.3m, up two per cent from Dh672.8m a year ago.
"Looking ahead, RAKBank's new three-year strategy will focus on building the performance of improved business units and continuing to innovate through the introduction of a more diverse range of products, services, and initiatives,” Mr England, said.
Updated: July 25, 2018 03:56 PM